What determines the price of bitcoin?
Bitcoin is one of the cryptocurrencies which has value and also it has characteristics same as of money such as durability and portability. Its value does not rely on physical properties like gold but it is completely based on mathematics. The value of bitcoins is determined by growing base of its users and merchants and people who accept it as a payment.
It is not only enough for you to know what is bitcoin but also you have to know something apart from it to know its value fluctuations. The price of bitcoins can be decided by its supply as well as demand, in other words we can say when its demand increases, and then obviously its price increases. When no one wants to but bitcoins then we can see a fall in its price. Though there are some fluctuations in bitcoin price, its value will never fall down. This is because there is only limited number of bitcoins in this world and also they are created at a slower rate.
In order to keep its price stable, the demand should follow the level of inflation and therefore there si no risk of inflation involved with this bitcoins. The following are a few factors that can influence the value of bitcoins:
- Supply of bitcoins
- Demand for it in the bitcoin exchange market
- Cost of producing bitcoins through mining process
- Value of other cryptocurrencies
Since bitcoin is still a small market, it does not take a considerable amount of money to move the market up or down, making the price of bitcoin still very unstable.